VIX Sounds the All-Clear

Keep calm and carry on: That was the message from the “fear gauge” this week.

The Chicago Board Options Exchange’s Volatility Index saw its biggest jump since 2011 Monday–but by Wednesday, the VIX had undone 88% of that spike. It set a few related volume records in the process.

Monday’s move “was the initial test of this new low-volatility period,” said Jim Strugger, derivatives strategist at MKM Partners. “Now it’s certainly gotten over that first hurdle.”

The VIX dropped 2.14 points, or 13%, to 14.73 Wednesday afternoon, extending a two-day slide to 4.26 points, or 22%. That drop comes as stocks recover from a one-day shock Monday that sent the Standard & Poor’s 500-stock index down 1.8% and the VIX up 34%, notching its largest one-day percentage gain since August 2011. The S&P 500 was up 1.3% Wednesday.

The VIX is calculated from the prices investors are willing to pay for protective options tied to the Standard & Poor’s 500-stock index. It tends to rise as stocks fall.